Build affordable housing and they will come.

That's what Gil Barden thought. But the Big Island developer two weeks ago offered 21 units at county-defined affordable prices as part of a 105-unit Hilo condominium project, and only one potential buyer signed up.

"Shocked" is how Barden described his response, adding, "We haven't had a very strong reaction from the affordable community."

The 21 one-bedroom units are available for about $205,000 — a price within county affordable-housing standards that Barden volunteered to meet.

Interest was dramatically stronger from prospective buyers who reserved roughly half of 84 units offered at market prices from $210,000 to $450,000 in the three-story project called Wailuku Village, a half mile outside downtown Hilo.

Observers say the response to Wailuku Village's below-market units is surprising given demand for moderately priced homes in a state where sky-high prices have left many average buyers out of the market.

And judging from other affordable condo projects sold around the state recently, Barden's experience is unusual.

Last month on O'ahu, sales began for a planned 330-unit affordable housing condo on state land in Waipahu called Plantation Town Apartments. The project received an initial response from 80 prequalified buyers earning no more than 120 percent of O'ahu's median income.

Plantation Town prices range from $131,500 for 362-square-foot units with one bedroom to $291,000 for 643-square-foot units with three bedrooms.

"We had a wonderful response to our initial call for applications," Dan Davidson, Hawaii Housing Finance and Development Corp. executive director, said in a statement announcing the sales launch.

On Kaua'i, D.R. Horton's Schuler Division in early September released 30 affordable townhouse units priced at an average $280,000 for buyers earning up to 140 percent of the county median income. About 70 applications were received, and 20 units have sold to date via lottery.

"We've had real strong demand," said Mike Jones, Schuler Division president.

On the Big Island in Kona, developer Westpro Holdings held a lottery for the 108-unit Seascape affordable condo project in July and received 300 entries.

Seascape units with two bedrooms, two bathrooms and about 1,000 square feet of space are selling for $284,600 to buyers earning up to 130 percent of the county median income.

The $205,000 Wailuku Village condos, with about 600 square feet excluding lanai, are deemed by Hawai'i County to be affordable for buyers earning $57,510, which is 130 percent of the Big Island median income for a family of two.

Barden said he expected far more response even though the units are only slightly cheaper than market-priced units that attracted a response he said was above his expectations.

Jeremy McComber, a Hawai'i County housing and community development specialist, said he hopes interest in Wailuku Village's below-market units picks up. "I know there is a need for it," he said.

McComber said that before last year, relatively little affordable housing was produced in Hilo because developers mandated to provide affordable housing could instead pay a fee that represented a fraction of the cost to build the homes.

Regulations changed last year to encourage more affordablehousing production, and in the July 2005-June 2006 fiscal year, 170 affordable units were slated for development but have yet to be completed.

DEFINING 'AFFORDABLE'

Under county rules, developers mandated to provide affordable units may choose to sell them within a price range that's affordable to buyers earning 60 percent to 140 percent of the median income.

The federal Department of Housing and Urban Development regards "very low" income as being 50 percent of the median, and "low" income as 80 percent of the median. The median is a point at which half the employed population earns more and half less.

McComber said most developers who must provide affordable housing opt to sell units at the upper end of the range, though some nonprofit developers provide units at the lower end. "There are units at each end of the spectrum," he said.

Barden said he initially wanted to develop Wailuku Village as a 100 percent affordable project, but that soaring construction costs made that plan financially infeasible. Pricing the 21 units lower, he said, left the project with too little projected profit for the risk financial backers are taking. "There's a lot of risk," Barden said. "There's a fine line in making a return to make the project feasible."

Observers said that Wailuku Village's below-market units being more moderately priced may be missing the market where demand is greatest.

"You take real working local people, the real supply and demand price is $150,000," said Big Island broker Bob Riley, of Hawaii Land Realty Corp. "There's none around for that."

Riley said older single-family homes in outlying areas around Hilo can be found for close to $200,000, which may be competing with Wailuku Village's below-market units.

LOW-PRICED HILO MARKET

According to Hawaii Information Service, the median sale price of older previously owned Hilo condos ranged from $100,000 to $177,500 in the past two months.

Hilo also is a market dominated by large-lot single-family homes, as opposed to condos with amenities and maintenance fees but little personal yard space. In fact, Barden and county officials say Wailuku Village is the first major new condo project for Hilo in roughly three decades.

Another possible challenge for selling Wailuku Village's below-market units may be the requirements, which include submitting tax returns with a purchase application, being a first-time home buyer and not exceeding income limits.

Barden said about 80 prospective buyers sought applications, but only one reservation was made to participate in a lottery to buy the below-market units.

If Barden doesn't receive reservations for all below-market units after 90 days, he plans to make any unreserved units available at market prices to anyone.

Typically, under county rules mandating 20 percent below-market units for housing projects on land rezoned for residential use, unreserved affordable units after 90 days are made available for another 30 days to buyers who meet income guidelines but have previously owned a home. After that, the units can be sold to anyone at the below-market price.

But Wailuku Gardens wasn't required by the county to provide below-market units. Barden volunteered to offer below-market units, and committed to the initial 90-day sale period to qualified buyers.

For offering below-market units, Barden received expedited permitting. And for each below-market unit sold, he will receive credits he can sell to other developers wanting to satisfy affordable housing requirements. But Barden said his main motivation was to help average buyers.

"I consider myself a community developer, and I wanted to give back to the community," he said. "It's actually good for us (financially) if (the affordable units) don't sell."

Barden, president of Pacific Island Investments LLC, is primarily a single-family home builder who has developed about 25 homes on the Big Island in the past two years.

The developer partnered with California-based Invest West Financial Corp. to develop Wailuku Village, Barden's first multifamily project. Barden and Invest West in January bought the land for Wailuku Village, a 4.4-acre site previously planned for a 113-unit retirement condominium with assisted living services by developer Maryl Group in the mid-1990s.

The Maryl project, called Lyman Gardens, had called for one- and two-bedroom condos for sale to seniors at $129,000 to $238,000 plus monthly fees for assisted-living services. But a deflating real estate market combined with buyer cancellations led Maryl to abandon the project in 1998.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.